Posted on Wednesday July 15, 2015 7:16 PM
by Joseph Kazickas No Comments »

An exclusive rental offering the renting agent a 5% commission...

An exclusive rental offering the renting agent a 5% commission…

...or an open listing offering the renting agent 10%. As a real estate agent which would you rather show?

…or an open listing offering the renting agent 10%. As a real estate agent which would you rather show?


In the last year or so we have seen a smattering of “exclusive rentals.” Exactly as the term implies, an exclusive rental is a rental property wherein the owner has designated a real estate agent to act as his exclusive representative in any negotiations surrounding a possible rental transaction. In essence, a real estate agent with a potential rental customer must now work through the exclusive agent rather than deal with the owner directly, as is more commonly the case.
In addition the prevailing 10% rental commission is now to be shared between the exclusive listing agent and the renting agent. Usually there is a pretty generous split of as much as 90% to the renting agent, but oftentimes the split is 50/50.
Giving a real estate agent the exclusive right to rent one’s property may not be such a good idea. Here’s why.
In a market such as the Hamptons, which suffers from an oversupply of rental properties, dis-incentivizing real estate agents because the commission is shared creates a real reason for not showing a property. But even if a landlord offers the renting agent a full 10% there is another reason why an agent might decide not to show an exclusive rental, and that is surrendering the name and contact information of his customer to the exclusive listor. Who would want to do that?
Not all real estate agents in our market will work with rental customers. Those who don’t have real estate businesses which are likely mature and they derive most of their leads by way of referral.
The vast body of real estate agents, however, understands that even though rental commissions are small compared to commissions earned in the resale market, the rental business can serve as an incubator for future resale business. In short rentals often lead to sales.
Of course, there might be circumstances where a homeowner feels more comfortable with a single point of contact, either because of the uniqueness of the property or because they just don’t want to deal with unknown real estate agents. We hear of agents who have been instructed by their broker/managers to actively solicit rental exclusives and they will pitch the benefits of an exclusive, without ever mentioning why it may not be in the best interest of the owner.
Success in bringing about real estate transactions lies in aligning the interests of all stakeholders. An exclusive rental tends to corrupt the process.